S&P Global Platts – Thanks to booming US output, as well as increased supplies from Saudi Arabia, Russia and other major producers, oil prices have eased despite the Trump administration’s reimposition of sanctions on Iran in November.
But as OPEC and its allies implement production cuts to bolster prices, US officials say they will be closely monitoring the market in considering whether to extend waivers that allow eight countries to continue buying Iranian oil.
The waivers — for China, Greece, India, Italy, Japan, Taiwan, Turkey and South Korea — expire in May.
“All I can say is that certainly when we have a better supplied oil market, then that will put us in a better path to [reducing Iranian crude exports] to zero,” Brian Hook, the US’ special representative for Iran, said Saturday at an Atlantic Council forum in Abu Dhabi.
Oil prices have rallied by about $9/b since Christmas Eve, with Brent futures trading at $59.34/b at 1020 GMT Monday, as Saudi Arabia signaled it had already slashed its production by some 400,000 b/d in December and would overcomply with its quota under the OPEC/non-OPEC cut agreement, which runs for the first six months of this year.
Iran’s output, meanwhile, is down by about 1 million b/d since last May, when President Donald Trump declared his intention to withdraw from the Iran nuclear deal and reimpose sanctions.
In an interview with S&P Global Platts on the sidelines of the forum, Hook expanded on the US’ sanctions strategy, saying the Trump administration can continue to use the measures to pressure Iran while maintaining low oil prices for consumers. Below is a transcript, which has been lightly edited for clarity.
PLATTS: How do you marry contradictions in US oil policy, in the sense of taking barrels off the market while also keeping prices low?
HOOK: We have done that, it’s not a contradiction. We have succeeded in doing exactly that.
PLATTS: But oil prices are now much higher than they were previously.
HOOK: No, because when the president announced he was leaving the deal in May, oil was at $74/b. We took off a million [b/d of Iranian crude production], and after he did that oil [prices went down].
PLATTS: But Trump has consistently called for much lower prices. How can the US achieve that while also keeping these sanctions in place?
HOOK: To date we have, and there’s no reason to think that we couldn’t continue to do that. [US producers] were able to increase production by 1.4 million b/d within that period, and that was production that we exported. The Saudis increased production. After what happened with Venezuela and Libya, it was a tight market, and then we came on with Iran and took off another million barrels. So I think we’ve seen very good cooperation to ensure a well-supplied and stable oil market. Iran accounts for a small percentage of total oil production. [Iranian exports] have gone from 2.7 million b/d to under a million b/d, and now oil is at $60/b, so we have been very successful in balancing our national security interests with our economic interests.
PLATTS: Would you consider granting any waivers for natural gas?
HOOK: We’re not looking to grant waivers in anything. Our sanctions, we took a different approach to the prior administration which sanctioned crude oil exports. We have sanctions [on] crude oil, condensates and all oil products. We have seen a collapse as a consequence of our sanctions. 80% of Iran’s revenue come from oil. If we are serious about maximum economic pressure then we need to go after the oil, the condensates and all oil products.
PLATTS: Is there a potential for a new Iran deal?
HOOK: After the president left the Iran deal in May, [US Secretary of State Mike] Pompeo gave a speech presenting new Iran strategy and returned to global consensus on Iran’s behavior before Iran deal. If Iran is willing to stop behaving like a revolutionary regime and start behaving like a normal country, the US is willing to reinstate full bilateral relations and welcome Iran back into the international community.
We very much believe that there is a better future for the Iranian people. Our foreign policy with respect to Iran has three pillars: maximum economic pressure, restoring deterrents and standing with the Iranian people.
Pompeo announced yesterday that we will be convening a global ministerial on the Middle East in Warsaw, Poland, in February. Iran is a primary driver of instability in the Middle East and so Iran will be a major topic.
PLATTS: Is there any timeline for approaching Iran on this potential new deal?
HOOK: That’s up to the Iranians. The ayatollah has said that he requires hostility with the US. They understand that our sanctions are working and they have deepened Iran’s economic isolation. It’s only going to get worse for this regime.